SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 1999.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: 001-14973
ATR INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3422912
--------------- -------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4614 North University Drive, Ft. Lauderdale, Florida 33351
------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
(954) 572-4023
--------------------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes XX No
The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of August 16, 1999 was 12,816,604
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.................................10
PART II
ITEM 1. LEGAL PROCEEDINGS....................................................11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................12
SIGNATURES....................................................................12
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to ATR Industries, Inc., a
Nevada corporation, and its subsidiaries and predecessors unless otherwise
indicated. Consolidated, unaudited, condensed interim financial statements
including a balance sheet for the Company as of the quarter ended June 30, 1999
and statements of operations, and statements of cash flows for the interim
period up to the date of such balance sheet and the comparable period of the
preceding year are attached hereto as Pages F-1 through F-8 and are incorporated
herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
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ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Unaudited Condensed Balance Sheet June 30, 1999 ................F-2
Consolidated Unaudited Condensed Statements of Operations
June 30, 1999 and 1998....................................................F-3
Consolidated Unaudited Condensed Statements of Cash Flows
June 30,1999 and 1998......................................................F-4
Consolidated Unaudited Condensed Statement of Shareholders' Equity
June 30, 1999 .............................................................F-5
Notes to Consolidated Unaudited Condensed Financial Statements
June 30, 1999..............................................................F-6
See notes to consolidated unaudited condensed financial statements.
F-1
CONSOLIDATED BALANCE SHEETS
ATR INDUSTRIES, INC. & SUBSIDIARIES
As of June 30, 1999 & December 31, 1998
ASSETS (Unaudited)
June 30, 1999
CURRENT ASSETS
Cash $ 85,790
Recoverable income taxes ---
Accounts receivable 5,045
Interest receivable 17,197
Prepaid rent 4,339
Prepaid opening expenses 7,375
---------------
TOTAL CURRENT ASSETS 119,746
PROPERTY AND EQUIPMENT
Furniture 4,215
Leasehold improvements 2,000
Equipment 23,631
Accumulated depreciation (26,994)
---------------
NET PROPERTY AND EQUIPMENT 2,852
OTHER ASSETS
Deposits 1,700
Deferred taxes 4,071
---------------
TOTAL OTHER ASSETS 5,771
TOTAL ASSETS $ 128,369
===============
See notes to consolidated unaudited condensed financial statements.
F-2
CONSOLIDATED BALANCE SHEETS (CONTINUED)
ATR INDUSTRIES, INC. & SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
(Unaudited)
June 30, 1999
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 4,930
Excess of outstanding checks over
bank balance -
Shareholder loans payable 3,748
Current portion of capitalized
lease obligation 2,402
----------
TOTAL CURRENT LIABILITIES 11,080
----------
LONG-TERM DEBT
Capitalized lease obligation 6,035
STOCKHOLDERS' EQUITY(DEFICIT)
Common stock 9,344
($.001, par value,100,000,000
authorized- 9,343,399 issued
and outstanding)
Common stock subscribed($.001,
par value, 3,473,205 subscribed
at $.22 per share) 3,473
Preferred stock (50 million
authorized- zero issued and
outstanding) -
Common stock subscriptions
receivable (764,105)
Additional Paid-in-Capital 947,566
Retained deficit (85,024)
---------
TOTAL STOCKHOLDERS'EQUITY(DEFICIT) 111,254
---------
$ 128,369
See notes to consolidated unaudited condensed financial statements.
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
ATR INDUSTRIES, INC. & SUBSIDIARIES
For the Three and Six Months Ended June 30, 1999 & 1998
Three Three Six Six
Months Ended Months Ended Months Ended Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
REVENUE
Sales $ 106,390 $ 107,203 $ 232,476 $ 223,367
Cost of Labor (59,834) (66,937) (129,814) (133,656)
------------ ----------- ----------- -------------
GROSS PROFIT 46,556 40,266 102,662 89,711
EXPENSES
Advertising $ 24,435 $ 13,390 $ 41,954 $ 30,891
Auto Expenses 1,272 1,494 1,272 1,494
Contract Labor 395 - 2,298
Depreciation 650 160 1,300 1,300
Dues & Fees 100 1,150 2,100 1,250
Employee Benefits 534 4,006 1,573 4,306
Employee Leasing 23,524 15,728 30,452 29,149
Equipment Leasing 516 - 1,442 1,276
Interest Expense 260 290 621 580
Miscellaneous Expense 100 100 234 117
Office Expenses 6,353 2,560 10,096 2,767
Professional Fees 8,400 - 20,524 -
Public Trading 5,480 194 7,800 1,200
Rent 4,642 4,521 10,946 8,406
Supplies 4,626 248 5,034 467
Taxes & Licenses 70 150 195 214
Telephone 2,211 1,391 5,873 4,629
Utilities 155 214 594 331
----------- ---------- ---------- ------------
TOTAL EXPENSES 83,328 45,990 142,009 90,675
----------- ---------- ----------- ------------
OPERATING LOSS 36,772 5,725 39,347 964
Interest Income - - 17,197 -
Deferred Tax Benefit 6,000 1,400 3,671 400
------------------ ------------ ----------- ------------
NET LOSS $ 30,772 $ 4,325 $ 18,479 $ 564
Net Loss Per Share-
Basic and fully diluted $ ** N/A $ ** N/A
============ =========== ========== ============
Weighted Average Shares 12,816,604 N/A 11,767,175 N/A
** Less than $ 0.01
See notes to consolidated unaudited condensed financial statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
ATR INDUSTRIES, INC. & SUBSIDIARIES
For the Six Months Ended June 30, 1999 & 1998
Six Months Ended
June 30
-------------------------------
Unaudited
1999 1998
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (18,479) $ (564)
Adjustments to reconcile net loss
to net cash provided by(used in)operating
activities:
Depreciation 1,300 1,300
Deferred income taxes (3,671) 400
(Increase) decrease in operating assets:
Accounts receivable (4,545) 699
Interest receivable (17,197) -
Prepaid rent (4,339) -
Prepaid opening expenses (7,375) -
Increase (decrease) in operating liabilities:
Accounts payable & accrued expenses ( 7,060) 1,140
----------- ---------
NET CASH PROVIDED BY(USED IN)
OPERATING ACTIVITIES (61,366) 2,975
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issuances 193,095 -
Common stock adjustment - (317)
Principal repayments under capital lease (1,250) (1,191)
Shareholder loans receipts(repayments) (37,487) 1,200
Excess of outstanding checks over
bank balance (11,366) (3,154)
----------- ---------
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES 142,992 (3,462)
------------ ----------
NET INCREASE(DECREASE) IN CASH
AND CASH EQUIVALENTS $ 81,626 $ (487)
Cash and cash equivalents,
beginning of period $ 4,164 $ 801
----------- ----------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 85,790 $ 314
=========== ==========
Supplementary cash flow disclosure:
Cash paid for interest $ 621 $ 580
=========== =========
See notes to consolidated unaudited condensed financial
statements.
F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ATR INDUSTRIES, INC. & SUBSIDIARIES
June 30, 1999 (UNAUDITED)
ITEM 1.
1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments consisting only of normal recurring accruals
considered necessary to present fairly the Company's financial position at June
30, 1999, the results of operations for the three and six month periods ended
June 30,1999 and 1998, and cash flows for the six months ended June 30, 1999 and
1998. The results for the period ended June 30, 1999, are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 1999.
2 - EARNINGS (LOSS) PER SHARE
The following represents the calculation of earnings (loss) per share:
Three Six
Months Ended Months Ended
BASIC & FULLY DILUTED* June 30, 1999 June 30, 1998 June 30, 1999 June 30,1998
- - ---------------------
Net Loss $ 30,772 $ 4,325 $ 18,479 $ 564
Less- preferred stock dividends - - - -
------------ ------------- ------------- -----------
Net Loss $ 30,772 $ 4,325 $ 18,479 $ 564
Weighted average number
Of common shares 12,816,604 N/A $ 11,767,175 N/A
------------ ------------- ------------- -----------
Basic & Fully Diluted
loss per share $ ** N/A $ ** N/A
============ ============== ============= ===========
* The Company had no common stock equivalents during the periods presented
** Less than $0.01
See notes to consolidated unaudited condensed financial
statements.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
With the exception of historical facts stated herein, the matters discussed in
this report are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future
revenues and earnings from operations of the Company. Readers of this report are
cautioned not to put undue reliance on "forward looking" statements which are,
by their nature, uncertain as reliable indicators of future performance. The
Company disclaims any intent or obligation to publicly update these "forward
looking" statements, whether as a result of new information, future events, or
otherwise.
General
The Company operates Cleaning Express USA, Inc, a wholly owned subsidiary, which
offers residential cleaning services, carpet cleaning and other related
services. Third quarter plans for Cleaning Express USA, Inc. include the opening
of a new location in the city of Miami, Florida to reach a much greater share of
the South Florida cleaning market. This expansion will allow the company to
offer cleaning and related services to an additional estimated 5,000 customers
in the Miami area. Total costs to complete the new location are estimated at
$24,400. During the second quarter of 1999, the Company began construction of
BeautyMax.Com, a virtual online superstore for cosmetics and related beauty
products. BeautyMax.Com is planned to open in October of 1999 and will offer
thousands of varieties of designer brand cosmetics. The company plans to launch
an online advertising campaign to promote the new site during the third quarter.
The Company has prepaid rent and prepaid opening expenses of $4,339 and $7,375,
respectively, relating to the BeautyMax.Com project as of June 30, 1999. The
Company will continue to build for the future by re-directing resources to the
development of BeautyMax.Com. Based on current research, management feels the
greatest growth potential lies within its e-commerce operations. Plans to open
the BeautyMax.Com corporate headquarters in Ft. Lauderdale are scheduled for the
third quarter.
Results of Operations
Revenues were $106,390 for the three months ended June 30, 1999 versus $107,203
for the three months ended June 30, 1998, a decrease of less than 1%. This
decrease is primarily attributable to seasonal fluctuations in demand within the
South Florida cleaning market. The Company incurred a net loss from operations
of $30,772 for the three months ended June 30,1999 versus a net loss of $4,325
for the same period ended June 30, 1998. The increase in the net loss was
attributable to additional personnel expense, professional fees, and advertising
expenses, which increased $7,796, $8,400, and $11,045, respectively. The
increase in advertising and personnel expenses was primarily due to the
Company's preparation and development of BeautyMax.Com. The increase in
professional fees was due to the Company obtaining trading status on the OTC
Bulletin Board. Average selling prices and gross margins remained fairly
constant.
Liquidity and Capital Resources
On June 30, 1999, the Company had cash of $85,790 and working capital of
$108,666. This compares with cash of $314 and working capital deficit of $30,407
at June 30, 1998. The increase in working capital was due to a decrease in
accounts and shareholder loans payable, offset by an increase in interest
receivable and an increase in cash from proceeds of common stock. Net cash used
in operating activities was $61,366 for the six
4
month ended June 30, 1999 as compared with cash provided by operating activities
of $2,975 for the period ended June 30, 1998. Cash provided by financing
activities totaled $142,992 for the six months ended June 30, 1999 as compared
with cash used in financing activities of $3,462 for the six months ended June
30, 1998. The increase in cash provided by financing activities was primarily
due to the issuance of the Company's common stock during the first six months
ended June 30, 1999 as described below.
The Company received $193,095 from the issuance of 877,705 shares of common
stock which it intends to use to fund the new Miami office opening of Cleaning
Express USA, Inc. and for expenses relating to the grand opening of the
BeautyMax.Com online cosmetic superstore. Based on current levels of operations,
the Company is able to satisfy its cash requirements for the next twelve months.
The Company has subscribed to issue 3,473,205 additional shares of common stock
during the third quarter for $764,105. The subscription agreement for additional
shares was made with an unrelated investors. The subscription agreement provides
for the additional shares to be purchased at $.22 and is secured by promissory
notes which bear annual interest rates of 8%. Partial proceeds of cash from this
additional stock issuance will be used during the construction and advertising
of BeautyMax.Com. Construction and advertising cost are estimated at $15,500 and
$1,100, respectively for the quarter ending September 30, 1999.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's, or
its suppliers' and customers' computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company plans to upgrade a few personal computer systems during the third
quarter at an estimated cost of $4,600. The Company has not yet identified any
other Year 2000 problem but will continue to monitor the issue.
The Company has initiated formal communications with significant suppliers to
determine the extent to which those third parties' failure to remedy their own
Year 2000 Issues would materially effect the Company and its subsidiaries. In
the event that the Company receives indications from its suppliers that the Year
2000 Issue may materially effect their ability to conduct business, the Company
will seek contingency plans such as finding other vendors that are Year 2000
compliant or increase its inventory of supplies or parts in an attempt to ensure
smooth operations until such vendor can remedy the problem. The Company has not
received any indication from its suppliers that the Year 2000 Issue may
materially effect their ability to conduct business.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
5
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 10 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. No reports were filed on Form 8-K during the quarter.
6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ATR INDUSTRIES, INC.
August 16, 1999 __/s/___________________
Edward A. Roth, President
(Acting Chief Financial Officer)
7